Law of Large Numbers
MathematicsStatisticsDecision Making
The Law of Large Numbers states that as a sample size increases, its average becomes closer to the population mean.
Introduction
The Law of Large Numbers states that as a sample size increases, its average becomes closer to the population mean.
Core Principles
- Stability Over Time: Larger samples reduce variability.
- Predictability: Long-term results are more reliable than short-term outcomes.
- Risk Management: Mitigate uncertainty with larger datasets.
Applications
- Insurance for setting premiums based on actuarial data.
- Investment to reduce portfolio volatility.
Related Resources
- Tools: Statistical modeling software.
- Book: "The Drunkard’s Walk" by Leonard Mlodinow.